Govt raises Rs146.4 billion via fixed rate PIBs’ auction

KARACHI: The government on Wednesday raised Rs146.4 billion through the auction of fixed rate Pakistan Investment Bonds (PIBs), which was lower than the pre-auction target of Rs150 billion.

The cut-off yield on the three-year paper remained unchanged at 8.6900 percent, according to the central bank’s auction result. The yield on the five-year PIBs stood at 9.1980 percent, compared with the previous yield of 9.2000 percent. The bids for the 10, 20 and 30 years were rejected by the government.

However, the yield on the 15-year paper remained at 10.4000 percent. It was rejected in the previous auction held on June 9. The central bank said it sold Rs137.4 billion worth of three-year paper and Rs5 billion of the five-year and Rs4 billion worth of 15-year paper.

Analysts said the latest auction shows the market expects no change in the upcoming monetary policy review due this month. Some analysts however, see interest rates will start rising from the last quarter of 2021 due to a spike in global commodity prices.

The Monetary Policy Committee (MPC) maintained the policy rate at 7 percent in May and emphasised that it would continue to monitor developments affecting the outlook for inflation, financial stability and growth.

The government depends on banks for meeting its financing requirements due to zero borrowing from the State Bank of Pakistan.

The government plans to borrow Rs5.725 trillion from the domestic market via short-term and long-term papers in the first quarter of this fiscal year to finance the budget deficit. The government will borrow Rs4.750 trillion from the auctions of Market Treasury Bills (MTBs), while it also aims to fetch Rs975 billion through the sale of PIBs.